Asian markets traded mixed on Wednesday as fading momentum in artificial intelligence-linked stocks, elevated oil prices and concerns over persistent inflation kept investors cautious.Japan’s Nikkei 225 edged up less than 0.1% to 62,774.94, while South Korea’s Kospi gained 0.9% to 7,708.05 after recovering some recent losses.Australia’s S&P/ASX 200 slipped 0.3% to 8,645.80.Hong Kong’s Hang Seng Index fell 0.4% to 26,246.29, while China’s Shanghai Composite was little changed, down less than 0.1% at 4,213.86.As per Reuters, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.6% for a second straight session, as markets reacted to stalled US-Iran talks and hotter-than-expected US inflation data.
AI stocks under pressure
South Korean markets remained volatile after a recent AI-driven rally pushed stocks to record highs. Korean shares had earlier dropped as much as 3.2% before recovering.Shares of Samsung Electronics plunged 5.7% after the company failed to reach a wage agreement with its labour union, raising the possibility of a strike involving more than 50,000 workers that could affect chip production.On Wall Street, major US indices ended lower overnight, with technology stocks leading declines.The S&P 500 slipped 0.2% from its record high, while the Nasdaq Composite fell 0.7%, AP reported. Intel dropped 6.8% after a strong rally earlier this year, while Micron Technology lost 3.6%.“Corporate earnings and AI momentum are acting as the market’s primary shock absorbers, but the road is getting significantly rougher,” Tim Waterer, chief market analyst at KCM Trade, told AP.“With oil prices becoming entrenched at elevated levels and a diplomatic breakthrough between the US and Iran remaining elusive, the easy bullish narrative is becoming much harder to maintain.”
Oil prices remain elevated amid Iran tensions
Oil prices eased slightly on Wednesday but remained near multi-month highs due to ongoing tensions in the Middle East and continued disruptions around the Strait of Hormuz.Benchmark US crude fell 58 cents to $101.60 a barrel, while Brent crude slipped 66 cents to $107.11.Oil has largely remained above $100 per barrel since US and Israeli strikes on Iran earlier this year and Tehran’s effective closure of the Strait of Hormuz disrupted global supply flows.The fragile ceasefire between the US and Iran has also failed to reassure investors, with US President Donald Trump saying on Tuesday that he does not believe China’s help is necessary to end the conflict ahead of his meeting with Chinese President Xi Jinping later this week.“We’ve seen this movie before, and we know it doesn’t end with a breakthrough agreement that resets the US-China relationship,” Phillip Wool of Rayliant Investment Research told Reuters.
Inflation fears dampen rate cut hopes
Investors also reacted to stronger-than-expected US inflation data, which reinforced expectations that the Federal Reserve may keep interest rates elevated for longer.“A hotter-than-expected inflation report and persistent geopolitical tensions reminded investors that sticky prices and elevated energy costs are not going away anytime soon,” IG analyst Tony Sycamore told Reuters.Markets have largely ruled out any Federal Reserve rate cuts this year, while expectations for a rate hike by December have risen sharply, according to CME FedWatch data.US Treasury yields remained elevated, with the benchmark 10-year Treasury yield holding near 4.47%, its highest level since July.In currency markets, the US dollar strengthened slightly against the Japanese yen to 157.77, while gold edged 0.1% higher and bitcoin slipped marginally.
